Procurement Audit Course.pptx

8/10/2019 Procurement Audit Course.pptx

1/20

www.businessservicessupport.com

PROCUREMENTAUDITCOURSEBUSINESSSERVICESSUPPORTL IMITEDTRAINING
http://www.businessservicessupport.com/http://www.businessservicessupport.com/http://www.businessservicessupport.com/


2/20

COPYRIGHTTOBUSINESSSERVICESSUPPORTLIMITED2011

OBJECTIVES

To give delegates a good understand of the why and how ofcarrying out an audit of the procurement function, its

procedures and practices

2


3/20


4/20


Two Basic Issues

1. Is the function performing well?

Yes No

2. Are there improvements that need to be made?

Yes: what are they?

No: all operating well

ASSESSINGSUPPLIERSFINANCIAL

STRENGTHS& SYSTEMS

4


5/20


STAGESTOTHEAUDIT

5

1. Risk assessment approach

2. Evaluate internal controls

3. Test controls

4. Analyse results of tests to determinethe way forward

5. Perform substantive testing

6. Audit completion meeting: findings

and recommendations

7. Write, issue and discuss audit

report


6/20


PROCUREMENTAUDITPROCEDURES

6

Tenders and award of contracts What is the policy and process?

Purchase Order

Who authorises purchase orders?

Are POs used at receiving and payment stages?

Receiving

Do physical goods (and services) match those

ordered?

Are all terms on receiving document appropriate?


7/20COPYRIGHTTOBUSINESSSERVICESSUPPORTLIMITED2011

Accounts Payable Do invoices match orders, and receipts?

Are invoices accurate, payments correctly made and recorded?

Management

How is procurement managed?

Are controls in place and adequately monitored and followed

up?

7




Legal Agreements

8

What are our

key

procurement

requirements?

Does the

agreement

comply with

our standards?

What do our

procurement

procedures say

about non-

compliance?

What is our

legal position

with the

contracting

parties?




PROCUREMENTRISKMANAGEMENT

KEY RISKS INCLUDE:

Adverse impact on budgets, cash-flow and profitability

Customers kept waiting or turned down

Helplessness in dealing with supplier price increases.

Output prices forced up with loss of competitiveness.

Poor supplier performance or, worse, allocation or loss of

supply.

Fragmentation and loss of procurement negotiating

leverage.

9



KEY RISKS INCLUDE:

Legally unsound contracts heavily biased in suppliers

favour.

Unproductive use of human resources.

Insufficient 'internal challenge of specifications and

decision making.

Decision-makers prey to the tactics of salespeople.

Political embarrassment or damage to company image

and reputation.


10




KEY RISKS INCLUDE:

Exposure to internal and external fraud

Exploited and manipulated by monopolies, cartels and

hostile contractors.

Supplier innovations passed to competitors.

Beaten to the market by competitors with new products

or services.

11




KEY RISKS INCLUDE:

Damage to brand and company reputation by unethical

behaviour or incompetence.

Organisation is penalised for non-compliance withregulatory requirements.

Organisations activities become subject of public

scrutiny and investigation

12



KEYINTERNALCONTROLS

13

Reportingcontrols

Recordingcontrols

Reconciliationcontrols

Authorisationcontrols

Segregationof duties

Supervisorycontrols

Receivingcontrols



..methods and techniques for testingand validating exposures should be

reflective of the risk materiality and

likelihood of occurrence

14

AUDITTESTING



TYPES OF TESTS1. Walkthrough Tests: walk one or two transactions

sequentially through all the processing stages of the system

2. Enables the auditor to:

Confirm their understanding of the system

Highlight key controls which would need to be evaluated

further

PROCUREMENT:

Contract Purchase Order Receipt Invoice

Payment

15

AUDITTESTING



Substantive Tests - objectives of such tests may includeevidence of:

Completeness

Existence

Valuation

Ownership

Disclosure

Procurement: amounts owed to creditors at the end of the

period, goods ordered not yet received etc

16

AUDITTESTING



Types of tests

Audit Interviewing: useful for

Finding out information

Gaining access to other individuals

Further information

Gauge opinions

Procurement: how are suppliers authorised?

17

AUDITTESTING



Audit Interviewing: key

Preparation:

Know the interviewee

Know yourself!

Know what you want to accomplish

Opening of the interview: establish rapport and mutual confidence

During the interview: tact, patience and firmness, be a good listener.

Types of questions, accuracy of information

At the end of the interview: summarise, thanks, next steps

After the interview: follow up, document findings

Procurement: how are suppliers authorised?

18

AUDITTESTING



FRAUDPREVENTION

Key Control is Communication: What is fraud?

How can it happen?

What is its impact?

What can you do to prevent it?

What can you do if you suspect it?

What lessons can we learn from previous frauds?


20/20

FRAUDPREVENTION

Fraud awareness training External

Our ethics and policies

What to look for

Procurement fraud training

Procurement risks

Associated controls

Documents

Procurement Audit Course.pptx